Forecasts for an exceptionally strong El Niño are driving Brazilian farmers to seek more crop insurance, prompting Mapfre to tighten underwriting and reassess coverage in regions where extreme weather is expected to intensify.
Demand is strongest in areas with a history of climate-related losses, including Rio Grande do Sul, where heavier rainfall is expected, and Mato Grosso, which faces a higher risk of drought, Mapfre executives said. Interest is also increasing in less-established insurance markets such as Goiás.
“My next few days will be entirely about this phenomenon,” Fabio Damasceno, Mapfre’s technical director for agricultural insurance in Brazil, said at an event at the company’s São Paulo headquarters.
Damasceno was preparing to travel to Goiás to assess whether Mapfre could offer new policies in the state. He said the increase in demand was both a warning sign and a commercial opportunity.
“Without El Niño, this would have been a year of weak demand,” he said. “But it has increased interest in areas where we need to determine whether the product is properly designed or whether there is additional risk.”
On-site assessments are essential because insurance penetration and farmers’ understanding of coverage can vary widely even across regions with similar agricultural conditions, Damasceno said.
In newer markets, insurers must also explain that policies do not necessarily compensate farmers for their entire expected harvest, said Yane Freitas, an agricultural engineering specialist at Mapfre.
“Farmers in southern Brazil come to us already familiar with the risks and the coverage,” Freitas said. “In Goiás, a farmer may harvest 80 bags per hectare and expect to be compensated for all 80. The approach has to be different.”
More Scrutiny
Designing and selling policies has become more complex, particularly in areas where historical data point to a high probability of losses from windstorms, drought, flooding or electrical damage.
“I have worked in this market for 20 years, and this is the most complex environment I have ever seen,” Damasceno said.
Financial pressure across Brazil’s farm sector is adding to the risk. Some agricultural supply chains are operating with thin or negative margins, which may lead growers to reduce spending on fertilizer, crop protection, field management and technology.
“When farmers cut inputs, management practices and technology, crop resilience declines and risk increases,” Damasceno said.
Mapfre is not withdrawing coverage but has become more selective, he said. The stricter analysis may result in changes to premiums, coverage levels or insured yields.
The insurer is prioritizing farmers with long production histories and reliable farm-level data, allowing it to price risk more accurately and structure policies with clearer terms.
“The lack of data is a chronic problem, but some farmers have 20 years of records,” Damasceno said. “That immediately improves the product.”
The information also helps Mapfre decide where to deploy staff, including claims inspectors.
Insurers and Reinsurers
Mapfre must balance the needs of farmers with the requirements of reinsurers, which provide insurers with additional capacity to absorb large losses.
Policies must remain attractive to growers while meeting reinsurers’ risk standards, Damasceno said. That makes annual planning difficult because reinsurance contracts for the following year may have to be renewed before insurers know the final results of the current summer crop.
“I need to give the reinsurer confidence that the strategy is sound,” he said. “It is complex because I renew the following year’s reinsurance before I even have the result of the summer crop.”
The global nature of the reinsurance market means that major weather events can affect insurance capacity and pricing far beyond the region where losses occur.
“Reinsurers are global and provide capacity to several insurers, so tension is high,” Damasceno said. “Even when the work is done perfectly, a broader market impact affects everyone.”
Parametric Insurance
Mapfre is also developing a rural parametric insurance product as it prepares for more frequent climate-related losses.
Following its acquisition of Swiss parametric insurance specialist Blue Marble, Mapfre expects to introduce the product in Brazil in 2027, initially for coffee growers.
Parametric insurance pays claims automatically when a predetermined threshold — such as rainfall or temperature — is reached, rather than calculating compensation through an on-site assessment of actual losses.
The product can provide customized, lower-cost coverage and may allow insurers to serve more farmers, though payouts are typically more limited than under traditional policies.
“Parametric insurance is not as competitive for the main crops and risks, but it can complement traditional coverage,” Damasceno said. “It can also work in areas, including parts of Rio Grande do Sul, where insurance is no longer available because losses are considered almost certain.”
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
